Medicaid
Oversight and Advisory Committee

<MeetMDY1>November 23, 2009

The<MeetNo2>Medicaid Oversight and Advisory Committee
meeting was held on<Day>Monday,<MeetMDY2>November 23, 2009, at<MeetTime>1:00 PM, in<Room>Room
131 of the Capitol Annex. Senator Katie Stine, Co-Chair,
called the meeting to order, and the secretary called the roll.

Guests: Marty White and Bill Doll for the Kentucky
Medical Association; Murray Wood for the Cabinet for Health and Family
Services; Wayne Johnson for the Kentucky Association of Health Care Facilities;
and Anne Joseph.

LRC Staff: Miriam Fordham, Jonathan Scott, and Cindy
Smith.

The minutes of the August 24, 2009 meeting were approved
without objection.

The first item on the agenda was election of a Senate
Co-Chair. Senator Seum made a motion to elect Senator Katie Stine as Senate
co-chair, seconded by Senator Denton. There were no other nominations. There
was a motion by Senator Seum, seconded by Senator Denton, and approved by voice
vote to elect Senator Stine by acclamation.

The next item on the agenda was a presentation on the
Medicaid Transformation Grant, by Betsy Johnson, Esq., Commissioner, Department
for Medicaid Services, Cabinet for Health and Family Services. Commissioner
Johnson said that the Cabinet received a $4.9 million Medicaid Transformation
Grant. The contract was awarded to Affiliate Computer Services (ACS) in
mid-September. The scope of the project is aligned with the emerging national
direction for health information exchange. The pilot implementation date is
expected to be the second quarter of 2010. In regard to the Medicaid
Transformation and development of the Kentucky Health Information Exchange
(KHIE), the next steps are: developing requirements for vendor on-site
gathering; conducting connectivity meetings; holding weekly interoperability
forums; developing integration requirements; prioritizing hospitals for
connection; developing a strategic and operational plan; and developing the state
Medicaid HIT plan. Next, Commissioner Johnson spoke about funding provisions
under the Health Information Technology for Economic and Clinical Health
(HITECH) Act of the American Recovery and Reinvestment Act (ARRA) of 2009. She
said ARRA was passed and signed by President Obama on February 17, 2009. ARRA
provided funding for HITECH initiatives at the state level including: $2
billion to the Office of National Coordinator (ONC) for state grants to develop
and promote health information technology (HIT) and health information exchange
(HIE); state loan programs for the adoption of electronic health record technology
(EHR), and additional grant opportunities. The Centers for Medicare and Medicaid
Services received $35 billion to provide payment incentives for the adoption of
EHR technology in Medicaid and Medicare. Other HITECH funding totaled $5-10
billion.

In regard to provider incentives, Commissioner Johnson said CMS
Medicaid funding will be available to qualified providers and hospitals for EHR
technology beginning no sooner than 2011. There will be 100 percent federal
financial participation (FFP) incentive funds to providers. In order to
receive ARRA HITECH funding, certain criteria must be met. The criteria to
receive Medicaid Provider Incentive Payments include the following: status as an
eligible provider; use of certified EHR technology; and meeting the “meaningful
use” criteria in the employment of the certified EHR technology. In order to
receive incentive payments, acute care hospitals must have a Medicaid patient
volume of at least 10 percent; children’s hospitals have no Medicaid patient
volume requirement.

Senator Stine asked how the system coordinates with
eHealth. Commissioner Johnson said that they work with the eHealth board to
implement eHealth in Kentucky, and it will add to what has already been done.

Senator Stine asked how much of the $2 billion from the
Office of National Coordinator that Kentucky will see. Commissioner Johnson
said the state will find out in the middle of December what it will receive.

Senator Stine asked about the HITECH funding and when
Kentucky will find out about its share. Commissioner Johnson said it will be
mid-December as well for these dollars.

Senator Stine asked Commissioner Johnson to let the
committee know when and if Kentucky is receiving those funds. Commissioner
Johnson said she would.

Representative Lee commented that physicians would see a
sizable outlay of dollars and wondered how many would make an investment that
may take over five years to recoup. Commissioner Johnson said it has not been
decided if the money would be an upfront payment or would have to be recouped.

Representative Lee said the physicians are excited about
eHealth, but not about the expensive outlay for technology. Commissioner
Johnson said that it is still in the planning stages and their goal is to
encourage it and make it as easy as possible.

Senator Denton asked how rehab hospitals could access funds
if they are not included. Commissioner Johnson said they have to meet the
definition of eligible provider to be included. Commissioner Johnson will look
up more information on this and get it back to the committee.

The last item on the agenda was an update on cost containment
measures by Betsy Johnson, Esq., Commissioner, Department for Medicaid
Services, Cabinet for Health and Family Services. Commissioner Johnson said premium
and cost sharing has a $17.9 million state fiscal year (SFY) savings. The Department
for Medicaid Services report was filed with the Legislative Research Commission
on October 7, 2009. Recent cost containment measures include preferred drug list
management with a savings of $4,000,000 in SFY09; generic utilization and maximum
allowable cost with a savings of $1,000,000 in SFY09. She reported that generic
utilization has increased to 72.7 percent. Generally, a 1 percent increase in
utilization will equate to $1 million in savings. Also, prior authorization is
now required for Zanaflex caplets; the tablet version has a generic equivalent,
but the caplet does not. This is a savings of approximately $190,000 per month.
In regard to the health insurance premium program, she reported that as of November,
2008, there were six individuals enrolled. As of November, 2009, there are 29
individuals enrolled. There is an estimated cost savings of $1.3 million for
the 29 enrollees.

Commissioner Johnson said in regard to the commitment to reform
and cost containment, there is a state-wide disease management program focused
on chronic diseases or conditions where interventions can make a positive
clinical and financial impact in the short term.

As of January 1, 2009, the Department for Public Health took
over the diabetes disease management activities for approximately 400 Medicaid
members who were previously managed by a third-party vendor.

In reference to the Division of Program Integrity,
Commissioner Johnson reported that the division was created in June, 2008
within the Department for Medicaid Services. The Division has recovered $2.8
million more in 2009 (through October) than all of 2008. Program integrity
policy recommendations will result in additional savings over a five year
period. CMS conducted a comprehensive program integrity review of Medicaid in
July, 2009 to verify compliance with federal regulations and the effectiveness
of program integrity. During the exit conference, CMS staff commented that “Kentucky
has improved greatly from the last review,” and the new KY model is an
“efficient use of resources.”

Commissioner Johnson also discussed the pharmacy management
program. She said that the preferred drug list (PDL) program is ongoing. The
generic utilization and substitution rate has improved from 69.5 percent in
June, 2007 to 72.7 percent in 2009, a savings of approximately $3 million. She
said that on-site pharmacy audits began in June, 2009. Thirteen
pharmacies were audited during the second quarter of 2009, with anticipated
recoupment of $38,000.

Next, Commissioner Johnson commented on the web-based KenPAC
Project. She said that a short pilot demonstration of the first phase involving
two KenPAC providers has been completed. Providers were very impressed with
the functionality and benefit to their practices. Fifteen additional providers
have agreed to participate in the second phase, which is scheduled for early
2010.

Lastly, Commissioner Johnson reported on emergency room (ER)
utilization. ER utilization continues to be high, and other state Medicaid
programs are having the same experience. The Medicaid population has increased
by 13 percent since January 1, 2006. Emergency room trips per member have
remained steady at .08. Statewide disease management programs will assist in
lowering ER visits, and the web based KenPAC program will assist in lowering ER
Visits.

Senator Denton asked what the generic utilization rate was
before it was 72.7 percent. Commissioner Johnson said it was 69.5 percent in
June, 2007. Senator Denton asked for the figures on generic utilization per
quarter for the last two years. Commissioner Johnson said she would get that
data to the committee.

Senator Stine asked if Medicaid is a better payor than
employer sponsored health insurance plans. Commissioner Johnson said that
Medicaid is usually more generous.

Senator Denton asked if other states are paying copays.
Commissioner Johnson said she is not sure, and that she has not seen the
regulations yet.

Representative Burch asked how program integrity errors are
found. Commissioner Johnson said that is a function of the SURS contractor.

Representative Lee asked how many eligibles are in the
lock-in currently. Commissioner Johnson said currently there are 1,000.
Representative Lee said he hopes to see that number go up within the next
year.

Senator Denton asked if the Cabinet is looking at high users
of emergency rooms across the board since the number of emergency room visits
per member is staying at .08. Commissioner Johnson said they are looking at
that. Senator Denton asked for a resolution date by the next meeting.

Representative Jenkins asked if the Cabinet has compared the
utilization rate to that of Passport. Commissioner Johnson said they can look
at that.